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Irish Nationwide Building Society v. Malone [1998] IESC 58 (10th December, 1998)
THE
SUPREME COURT
RECORD
No 90/97
O‘FLAHERTY
J
LYNCH
J
BARRON
J
BETWEEN:
IRISH
NATIONWIDE BUILDING SOCIETY
PLAINTIFF/APPELLANT
AND
EILEEN
MALONE
DEFENDANT/RESPONDENT
Between:
EILEEN
MALONE
PLAINTIFF/RESPONDENT
AND
IRISH
NATIONWIDE BUILDING SOCIETY
DEFENDANT/APPELLANT
JUDGMENT
DELIVERED THE 10TH DAY OF DECEMBER 1998 BY LYNCH J. [Nem. Diss.]
1. This
is an appeal by the Irish Nationwide Building Society ( hereinafter called the
Building Society), the Plaintiffs in Special Summons proceedings issued on the
12th of December 1990 and the Defendants in Plenary Summons proceedings issued
on the 17th December 1990 against a judgment and order of the High Court
(Costello P) delivered and made on the
26th
February 1997 whereby the Building Society’s claim by way of Special
Summons was refused and the Respondents claim by way of Plenary Summons was
granted.
2. The
Building Society’s claim was for possession of premises situated at
Rathmoylon, County Meath, in which the Respondent resides and the
Respondent’s claim was for a declaration that she is relieved of any
liability whatsoever to repay to the Building Society any sums outstanding on
foot of a loan of £100,000 made by the Building Society to the Respondent
and her late husband Sean Malone on the 21st April 1989. The said proceedings
were consolidated by Order of the High Court made on the 13th of December 1993.
The consolidated proceedings were heard by Costello P on Friday the 21st and
Tuesday the 25th February 1997 and judgment was delivered on Wednesday the 26th
February 1997.
THE
FACTUAL BACKGROUND
3. The
litigation arises out of the tragic sudden death from a heart attack of the
Respondent’s late husband Sean Malone (Mr Malone). The Respondent and Mr
Malone had at the time of the events giving rise to the litigation four
children ranging in age from about 16 years to 10 years. Mr Malone had for many
years been a bank official in the Bank of Ireland in Trim, County Meath. He
took early retirement at the age of 47 years in the beginning of 1989 and he
and the Respondent purchased the premises the subject matter of these
proceedings with a view to carrying on a supermarket and licensed business and
residing on the premises.
4. The
Respondent and Mr Malone sought a loan in the sum of £100,000 from the
Building Society to enable them to purchase the premises. One of the conditions
of obtaining a loan from the Building Society was that a Mortgage Protection
Assurance Policy should be taken
2
out
by the borrower with an insurance company nominated or approved by the Building
Society. The Respondent and Mr Malone sent a mortgage application form signed
by them and dated the 8th of February 1989 to the Building Society on that date
in which the premises are described at paragraph 19 as a residence, licensed
premises and supermarket. Paragraph 23 with a side reference of
“mortgage
protection assurance”
provided
that
“in
the case of a repayment mortgage, as a further condition of advance, mortgage
protection assurance will be arranged with a suitable life office. The premium
will be charged to the mortgage
account
annually,
payment of which will be included in your monthly mortgage repayments
“.
5. Above
the signatures of the Respondent and Mr Malone, there was a section headed
“Declaration” which inter alia provided:
“We
hereby declare and agree:
(g) That
any of the information contained in this application may be sent to an
appropriate insurance company for the purpose of arranging
(3) Mortgage
protection assurance.”
6. A
further application form headed “Irish Nationwide Building Society”
and entitled “Application for Mortgage Protection Assurance” and
stating at the foot of the title page “Caledonian Insurance Company 40
Dawson Street Dublin 2” was signed by the Respondent and Mr Malone and
also dated the 8th February 1989 and was sent by them to the Building Society
along with the said loan application form. By this mortgage protection
assurance application form the Respondent and Mr Malone applied for the
mortgage protection
3
assurance
as required by the application form to the Building Society for the loan. The
8th February 1989 was a Wednesday so that the said loan application form and
mortgage protection assurance application form must be presumed to have been
received by the Building Society at the latest by Friday the 10th February 1989
and no issue arose as to this.
7. By
a letter of offer dated the 19th of March 1989 the Building Society sanctioned
the mortgage facilities in the sum of £100,000. The letter of sanction
provided inter alia
“To
reserve sanction, the attached letter must be signed and returned to the
society together with the mortgage fees within 14 days from the date of this
notice. No extension of this period will be granted”.
It
further provided
“This
offer is also subject to the legal title proving satisfactory, to the
conditions and terms set out below and to the rules of the society”.
Condition
(e) provided
‘that
the borrower (s) effects a mortgage protection assurance policy through the
society’s agency in the amount advanced”.
8. A
sum of £1,000 was charged by the Building Society and was paid as
required: the returned letter is signed by the Respondent and Mr Malone under
the following concluding paragraph:
“We
hereby accept the offer contained above, subject to the terms and conditions as
set out above. We have satisfied ourselves that the rate quoted is not a tiered
rate, as defined in the Building Society’s (Amendment) Act 1986 and
enclose the sum of IR£1,000 being the total mortgage administration fee
payable to the society inclusive of any liability to VAT.”
4
9. The
normal procedure for obtaining a loan from the Building Society was that as
soon as the Building Society had decided to sanction the loan requested by the
application form, they would send to the applicants a letter of offer (in this
case the letter of the 10th March 1989) and at the same time the Building
Society would send to the insurers (in this case the Caledonian Insurance
Company) the mortgage protection assurance application form, so that the
mortgage protection assurance could be put in place prior to draw down of the
loan. In this case the mortgage protection assurance application form was not
forwarded to the Caledonian Insurance Company by the Building Society at the
same time as the letter of offer was sent to the Respondent and Mr Malone and
it was not in fact posted to the Caledonian Insurance Company until the 7th
April 1989 and received by the Insurance Company on the 10th of April 1989. It
was conceded by the Building Society that they were at fault in this regard.
10. The
Respondent and Mr Malone were anxious to complete the purchase as soon as
possible and in fact the closing date became crystallised as the 13th of March
1989. The loan by the Building Society had just been sanctioned but was not yet
available, nor could it normally become available until the mortgage protection
assurance policy was in place. In the mean time the Respondent and Mr Malone
completed the purchase on the 13th March 1989 and entered into possession of
the premises on the 13th of March 1989 relying on bridging finance from the
Bank of Ireland Trim pending draw down of the loan. Draw down was of course
being delayed by the fact that the Building Society had overlooked forwarding
the mortgage protection assurance application form to the insurers until the
7th of April 1989. Eventually the Building Society agreed that the loan could
be drawn down in anticipation of the mortgage protection assurance policy
provided that the Respondent and Mr Malone signed forms which they did sign the
first form dated the 20th of April 1989 in manuscript
5
and
a further form dated the 21st of April 1989 in typed script on a sheet of paper
headed with the Building Society’s name. The forms read as follows:-
“Rathmovlon
Enfield County Meath 20-4-8 9
INBS
Dublin
We
undertake and agree to co-operate with Galedonian Insurance Co. to facilitate
effecting the mortgage protection policy.
Yours
faithful/v
Sean
Malone
Eileen
Malone’
“21
April 1989
We.
Sean and Eileen Malone, acknowledge that there is no life cover in force on
both of our live [sic] with the Caledonian Insurance Company.
We
agree to co-operate fully with any request that the Caledonian Company might
make in order to get life cover at the earliest possible time.
Sean
Malone
Eileen
Malone”.
11. The
loan was then drawn down in or about the 21st of April 1989 but little or no
progress was made regarding the issue of the mortgage protection assurance
policy by the Caledonian Insurance Company through the agency of the Building
Society. The application form for the policy contained provisions whereby the
Respondent and her husband consented to information on their health being
furnished by their respective general medical practitioners,
6
in
Mr Malone’s case Dr Burke. The insurance company wrote on the 12th of
April 1989 to both general medical practitioners and received a reply from the
Respondent’s doctor but the insurance company say they received no reply
from Dr Burke despite a reminder sent to him on the 26th of June 1989. It is
not suggested that there was any communication between the insurance company or
the Building Society and Dr Burke in the intervening two and a half months
between the letter of the 12th April and the reminder of 26th June 1989.
12. Evidence
was adduced at the trial that Mr Malone was a very prompt and meticulous person
in attending to business matters. The insurers wrote to the Respondent and Mr
Malone jointly on the 12th April 1989 inquiring if they would be involved in
the sale of alcohol: on the 30th of June 1989 they inquired if the Respondent
and Mr Malone would be involved in the running of the business and on the 18th
of July 1989 they repeated the latter inquiry. The letter of the 30th of June
was addressed to the Respondent’s and Mr Malone’s former residence
which by then they had both left and there was no evidence that that letter was
ever received by them. The other letters were received. The answers to these
queries as to the sale of alcohol and as to being involved in the running of
the business were long since within the knowledge of the Building Society as
well of course the Respondent and Mr Malone. As already stated Mr Malone died
suddenly on the 29th of July 1989 from a heart attack and before the mortgage
protection assurance policy had issued.
7
THE
SUBMISSIONS
13. Counsel
for the Building Society submitted:
1
The Malones accepted the loan at their own risk so far as mortgage protection
assurance was concerned and they so acknowledged by the documents of the 20th
and 21st of April 1989. No duty of care was owed by the Building Society to the
Malones in relation to mortgage protection assurance after the 21st of April
1989.
2
There is no causal link after the 21st of April 1989 between the Building
Society and the Malones regarding the absence of mortgage protection assurance.
Furthermore, the failure of the Malones and Dr Burke to attend to the
requirements of the insurers constituted an intervening act which was solely
responsible for the absence of mortgage protection assurance on the death of Mr
Malone. The Building Society had no control over these matters which concerned
the insurers and the Malones and the Building Society cannot be responsible for
them.
3
Apart from the failure of Dr Burke to reply, the insurers required a medical
examination of both the Respondent and Mr Malone and no progress was made in
that regard either.
4
If there remained any responsibility on the Building Society in relation to
mortgage protection assurance there certainly was a preponderance of
contributory negligence on the part of the Malones in failing to respond to the
requirements and inquiries of the insurers.
8
14. Counsel
for the Building Society referred to MacGillivray on Insurance Law:
McCann
& Cummins v. Brinks Allied Ltd & Ulster Bank Ltd
[1997]
1 ILRM 461: McMahon & Binchy Irish Law of Torts 2nd Edition page 45-48:
Crowley
v. Allied Irish Banks
[1987] IR 282
:
and
Conole
v. Red Bank Oyster Company
[1976]
IR 191
.
15. Counsel
for the Respondent submitted:
16. I.
The Building Society required that the Malones should employ them as their
agents to arrange the appropriate mortgage protection assurance and the
remuneration for the Building Society’s services as such insurance agent
was included in the sum of £1,000 provided for by the letter of offer of
the 10th March 1989 and indeed a further sum of £300 was also charged to
the Malones by the Building Society.
2.
The duty of the Building Society as such insurance agent was to attend to the
progress of the application for such assurance and to pursue it diligently. All
that the Building Society in fact did was to forward the mortgage protection
assurance application form by the Malones to the insurance company and even in
doing that they were guilty of serious and inexcusable delay.
3.
The Building Society was pressed to see to the completion of the mortgage
protection assurance by the Malones’ solicitors in letters of the 13th of
March, 16th of March and 18th of April 1989 and in other letters such as the
14th of March 1989 the early closing date was emphasized and the need for
urgent attention to all outstanding matters.
9
4.
After the 21st of April 1989 the Building Society did absolutely nothing to
progress the mortgage protection assurance. The Building Society were not
waiving the requirement on the Malones to enter into a mortgage protection
policy which was required by their letter of offer: they were merely waiving
the necessity to do so before draw down of the loan. They completely neglected
their duties as the Malones’ insurance agents to progress the insurance
diligently. In addition they neglected for over a month to forward a direct
debit mandate which if it had been forwarded as it ought to have been would
have resulted in insurance premiums being paid in advance of the formal
extraction of the policy. The Building Society also failed to inform the
insurers that the premises were a licensed premises which the Malones would be
involved in running although the Building Society was well aware of those facts
from the very beginning and thus inquiries from the insurers related to these
matters issued months after the receipt of the loan application form dated the
8th of February 1989 by the Building Society.
5.
Insofar
as the learned trial Judge found that Dr Burke neglected to return the form
sent to him on the 12 of April 1989 and a reminder of the 26th of June 1989
this was not the responsibility of the Malones. The application form for
mortgage protection assurance asked for the name and address of the general
medical practitioner. This was supplied by the Malones and the insurers
contacted the general practitioner. This does not make the general practitioner
the agent or nominee of Mr Malone. Moreover it is extraordinary that the
insurers by way of internal memorandum dated the 27th of June 1989 decided that
they required medical examinations from both the Respondent and Mr Malone but
they do not appear to have communicated this requirement either to the Malones
or the Building Society before the unfortunate death of Mr Malone a month
later. If the Building Society had been diligent in progressing the matter of
the mortgage protection
10
assurance
policy as the Malones’ insurance agents for that very purpose such an
extraordinary state of affairs could not have arisen. Their duty was to keep in
touch with the insurance company so as to be aware of any requirements of
theirs and to communicate such requirements to the Malones so as to make sure
that they in turn fulfil them.
6.
The Malones were not guilty of any contributory negligence. They had appointed
the Building Society as their insurance agents and the Building Society had
held itself out as having a special relationship with the Caledonian Insurance
Company to effect the mortgage protection assurance. The Malones through their
solicitors had impressed on the Building Society the urgency of progressing
matters including the mortgage protection assurance and on the 21st of April
1989 the Malones were led to believe that things which had held up the matter
up to then were being sorted out and that the procuring of the assurance cover
would proceed without further delay as deposed to by the Malones solicitor at
questions 324 to 327 of the transcript.
17. Counsel
for the Respondent referred to MacGillivray on Insurance Law in relation to the
duties of an insurance agent to his client the prospective insured and
distinguished on the facts the cases cited by Counsel for the Building Society
from this case.
11
CONCLUSIONS
18. By
the terms of their own documentation the Building Society had themselves
appointed as insurance agents for the Malones for valuable consideration to
arrange the mortgage protection assurance policy. The Building Society was
manifestly negligent as such agents in not forwarding the mortgage protection
assurance application form to the Caledonian Insurance Company until the 7th of
April 1989. They were aware of the closing of the purchase of the premises on
the 13th of March 1989 and furthermore that that involved the Malones in
obtaining bridging finance and nevertheless the mortgage protection assurance
application form was not dispatched by them for another three weeks thereafter.
The Building Society seemed to think that their only function as the
Malones’ insurance agents was to forward the mortgage protection
assurance application form to the Caledonian Insurance Company once they
themselves had sanctioned the loan and that thereafter they had no further
involvement or obligation in arranging the insurance. The Building Society
seemed to take the view that thereafter it was a matter solely between the
Caledonian Insurance Company and the Malones. This was quite wrong. The
evidence clearly established what the normal duties of an insurance agent are
(as accepted and enforced by the law) and those duties include close attention
to the progress of the matter until it is completed or abandoned.
19. The
Building Society say however that they were relieved of any further
responsibility for arranging the insurance in this case by the documents of the
20th and 21St of April 1989 signed by the Malones. There is nothing in either
of those documents to that effect. All that those documents did was to make
sure that the Malones were aware of their uninsured life status notwithstanding
authority from the Building Society to draw down the loan and to
12
remind
the Malones that they had an obligation to co-operate with the Caledonian
Insurance Company in completing the insurance. The Building Society still
remained under an obligation to keep in touch with the Malones and the
Caledonian Insurance Company in order to ensure as far as a possible that the
matter was progressing and was not sliding into inertia.
20. It
is really quite extraordinary that an application for mortgage protection
assurance is duly and properly completed by the Malones on the 8th of February
1989: is in the hands of the insurance agents (the Building Society) by the
10th of February 1989 and yet by the 29th of July 1989 some five and a half
months later the only things that have happened in relation to completing the
mortgage protection assurance policy on Mr Malone are:
21. I.
The application form was forwarded to the Caledonian Insurance Company on the
7th of April 1989 and received by them on the 10th of April 1989. No dispute
arises as to these dates.
2.
Mr Malone’s general medical practitioner Dr Burke was sent a form on
the 12th of April 1989 by the Caledonian Insurance Company to be completed by
him and returned to the insurers and not having done so he was sent on the 26th
of June 1989 some two and a half months later one and one only reminder.
3.
Mr Malone was sent a letter by the insurers on the 12th of April 1989
inquiring whether the Malones would be involved in the sale of alcohol: they
were sent a further letter dated the 30th of June 1989 addressed to their
former dwelling house which by then they had long since vacated inquiring
whether the Malones would be involved in running the business: and they were
sent another letter with the same inquiry addressed to them at
13
the
premises on the 18th of July 1989. In relation to these letters sent by the
Caledonian Insurance Company to the Malones the learned trial Judge found as
follows:
“The
evidence satisfies me that Mr Malone who was a man aged forty-seven, an
assistant bank manager and in very good health was a vigorous efficient person
and the evidence satisfies me that he did not receive the letter of the 30th of
June which was sent to the address at Pine Brook because he and his wife had
left it then but that he had received the letters of the 12th of April and the
18th of July. The letter of the 18th of July enclosed a stamped addressed
envelope: the stamped addressed envelope was not in his papers when he died and
lam quite satisfied that he must have attended to the request for information.
The evidence in relation to the medical aspect of the insurance is this: in the
normal way the Caledonian Insurance Company would require the insured’s
general practitioner to answer a form of questionnaire sent to him. The form
was sent to Dr Burke on behalf of Mr Malone and to Dr Cusack on behalf of Mrs
Malone on the 12th of April. Dr Cusack replied on the 28th of April but Dr
Burke did not. A reminder was sent to him on the 26th of June but the evidence
of the insurance company is that he failed to send the questionnaire back to
it. This was the situation when Mr Malone unfortunately died. Thus there are
two causes for the delay in effecting the insurance. The Caledonian had
obtained on the 10th of April the application form and on the 29th of July
following, three and a half months later no insurance policy had been issued.
The reason for the failure to effect the insurance at the time was the fact
that Dr Burke’s report on Mr Malone had not been made available to the
Society. Dr Burke thinks he sent it but I am not satisfied on this point.”
14
22. There
was ample evidence in the course of the trial to support the foregoing findings
of the learned trial Judge and I would not interfere with them.
4.
The Caledonian Insurance Company had decided within its own staff as revealed
by the internal memorandum of the 27th of June 1989 that they required to have
a medical examination of both the Respondent and Mr Malone. In relation to this
the learned trial Judge found as follows:
“The
Caledonian Insurance Company had come to the conclusion that it required a
medical examination because it had ascertained that alcohol would be sold on
the premises. It is of some considerable significance that this condition that
was raised in the course of the application for insurance was not referred to
by any officer of the Caledonian to the Malones and at no time were the Malones
told they would have to undergo a medical examination or at no time was Dr
Burke told or Dr Cusack told a medical examination was required nor did the
Caledonian inform the Nationwide Building Society and the evidence establishes
that the officers of the Building Society did nothing to effect this condition
which was a requirement before the policy of insurance could be effected.”
23. Again,
there was ample evidence to support these findings of the learned trial Judge
and I see no reason to interfere with them.
24. Apart
from the matters mentioned in the foregoing four paragraphs absolutely nothing
else happened in relation to completing the mortgage protection assurance
policy in the five and a
15
half
months between the 8th of February 1989 and the 29th of July 1989. The learned
trial Judge found as follows:
“I
am quite satisfied that the Building Society did not exercise due care and
skill in its capacity as agent for the Malones. There was in my view a breach
of the duty prior to the drawing down of the loan on the 21st of April. The
application for insurance should have been sent on the 10th of March and it was
not. It is accepted that this was contrary to its practise and it is said
there is no excuse for this and it was due to an advertance but it amounts to a
breach of duty to the Malones in my opinion to use due diligence because it was
obvious to everyone at the time that the question of the mortgage protection
assurance was a matter of priority in order that the sale could take place.
After the 21st of April over three months elapsed after the loan
(recte
the purchase)
had
been closed and the Building Society took no steps to contact the Caledonian
with a view to ensuring that the policy was effected In my view they had a duty
of care to their clients the Malones to ensure that the policy was taken out
and to exercise due diligence to see it was taken out. In fact the evidence
clearly establishes that no effective steps of any sort were taken by the
Building Society to see that the policy was taken out. The expert evidence in
the case establishes what the duty of care was what was involved in the duty of
care and the
0
duty of care, did involve following up the insurance company that was effecting
the insurance to see that it was done with due dispatch and there were no
proper steps to do what the duty required them to do and lam quite satisfied
also that had due diligence been used that the policy would have been effected
upon Mr Malone prior to his death. Had due diligence been exercised the
situation which had developed would have been found out immediately, namely
that tire insurance company was looking for
16
a
medical examination and Dr Burke had not apparent/v replied to the
questionnaire this would have been rectified in my opinion and the policy would
have been effected.”
25. Again
there was ample evidence to support these findings and there is no basis upon
which I should or would interfere with them. Indeed they are findings with
which I find myself in complete agreement.
26. Finally,
on the question of contributory negligence the learned trial Judge said:
“I
cannot agree with these submissions. I think they are based on a
misconstruction of the two letters to which I have referred There was clearly
no waiver of any claim that might exist at that time, there was no undertaking,
as has been suggested that the Malones would themselves obtain a policy from
the Caledonian. What they had agreed to was that they would co-operate with
Caledonian which is something entire/v different and which I think was complied
with. lam quite satisfied that the Building Society continued to act as the
Malones agent after the 21st of July (recte April): that they continued to owe
a duty of due diligence after that date and for the reasons already given they
failed in it. There was in my view no contributory negligence on the part of
Mrs Malone. I have indicated my acceptance of the evidence related to the
request of Mr Malone, lam convinced he would not have ignored the request for
information which was sent to him and I find no ground to suggest there was any
contributory negligence to the loss.”
17
27. Again,
in my view, the evidence adduced at the trial amply supports the foregoing
findings. Accordingly I would dismiss the Building Society’s appeal in
this case.
18
© 1998 Irish Supreme Court
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